This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
GameStop (NYSE:GME), a retailer of video games, consumer electronics, and gaming merchandise, continues to confound the financial world as the stock’s bulls and bears wage a high-stakes tug-of-war.
Not too far back, GameStop was dubbed a dying dinosaur and an analog instrument in the digital age. However, ever since the onset of the mania around meme stocks, GameStop has won for itself an absolutely devoted army of retail traders who remain committed to defending the company against attacks from its detractors. A prudent management would have taken decisive measures by now to capitalize on this historic opportunity to revitalize the company’s dying business. Instead, apart from its near-constant dithering, GameStop’s management has only been able to come up with half-baked ideas and paper plans when action is the need of the hour.
GameStop reported its third earnings for the year earlier in September. And for the third time in a row, its management failed to articulate a comprehensive turnaround plan. In fact, the earnings call itself lasted less than 10 minutes!
In the approaching era of cloud-based gaming, GameStop needs to think out of the box to strike gold, as its brick-and-mortar stores are already facing extinction. Where are the details of its much-anticipated partnership with AMC Entertainment (NYSE:AMC)? What does GameStop intend to do with its NFT-based platform? Where narrative and action are the two key components of seizing the initiative, the video game retailer seems content with bungled communication and uneasy silence.
In the meantime, GameStop’s devoted vanguard of retail traders continues to fight its battles. To wit, despite the disappointing lack of initiative from the company’s management, the stock’s short interest is not rocketing higher. According to the tabulation by S3 Partners, GameStop’s short interest (SI) was 12.23 percent of the entire float on the 18th of September, corresponding to $1.59 billion in bearish bets. For reference, GameStop’s short interest was $4.14 billion back in January. For obvious reasons, short-sellers remain apprehensive of ramping up their bearish bets, fearing a fresh onslaught of retail buying. It is this phenomenon that is holding up the company’s stock price. But for how long?
What Initiatives Can GameStop (NYSE: GME) Implement?
GameStop’s recent push into the arena of Non-Fungible Tokens (NFTs) is a solid initiative. To wit, the company has activated a dedicated website for NFTs that references players, creators, and collectors, thereby indicating an incoming ecosystem to cater to the gaming community. As NFTs are now being used to develop and monetize video games, GameStop’s interest in this field is logical. However, the devil is in the details – details that we still don’t know. A fantastic way for GameStop and AMC Entertainment to collaborate would be for the theater chain to integrate with GameStop’s upcoming NFT platform, allowing complete interoperability and transferability. For instance, theatergoers might redeem their tickets for NFTs on GameStop’s platform and vice versa. This approach would not only create additional demand for GameStop’s NFT platform but also allow AMC Entertainment to tap into this growing phenomenon, netting a win-win formula in the process.
Overstock (NASDAQ:OSTK) became a pioneer last year when it issued digital dividends, where 1 share of the OSTKO blockchain-based security token was offered for every 10 shares owned. Bear in mind that a security token is simply a digital representation of a security – in this case, a share. However, it must comply with securities laws. Since GameStop is not profitable, it can’t replicate this move. But the company can do something similar.
GameStop can implement a share buyback program using either a security token or an NFT that would be deemed a “security” by the SEC. As a refresher, the SEC has used the Howey test to stamp the “security” label on various offerings of digital assets and cryptocurrencies, thereby bringing these offerings within the purview of the securities laws. In layman's terms, if an NFT is marketed and sold with the expectation of a future return on investment, it would generally be deemed a security. So, how will this scheme work? Well, it would work mostly like a regular share buyback program, with the caveat that the GameStop shareholders would surrender their shares to receive either a dedicated security token or an NFT – again deemed a security – instead of cash. The NFT or the token can be marketed as a claim against the company’s earnings from its broad-based NFT platform. The holders of that token/NFT could be further incentivized by allowing its use as a medium of payment on GameStop’s NFT platform.
In finance, clarity is often afforded in hindsight. We do not know how the ongoing meme stock mania would end. But one thing is absolutely certain: the clock is ticking for GameStop to avail of the present opportunity.